Part 3: Market Conduct Standards
Section A: Policy Forms and Rates
Policy Wording and Packaging
21. The wording of the insurance policy application and contract forms must adhere, at a minimum, to the following:
a) Written in Arabic and be made available in English upon customer request.
b) Use simple language and sentence structure, when possible.
c) Printed in clear, readable text, with no fine print.
22. The printed insurance policy application and contract forms must adhere to requirements set in article 52 of the Implementing Regulations, and include:
a) A disclosure statement indicating that the policy contract is the entire contract.
b) A description of the insured’s duties after a loss has been incurred.
c) A description of the claims handling and dispute handling procedures as well as the documentation required for each.
d) Any other written endorsements, supplements, or documents.
Policy Amendments
23. An insurance policy contract shall be amended only after a written and signed request submitted by the policyholder by mail or fax, and to which the insurance company agrees followed by an endorsement issued by the insurance company to the policyholder.
24. For spelling mistakes and changes in the regulations, the policy contract can be modified without a written request as long as the customer is notified in writing.
Policy Cancellation
25. Companies should include cancellation terms that are fair to customers and are reasonable and appropriate with regard to the product. The cancellation conditions must be clearly stated in the policy contract, including:
a) Conditions permitting the insurance company to cancel the policy.
b) Conditions permitting the policyholder to cancel the policy.
c) Cancellation notice requirements, including notice period. In any case, excluding emergency cases such as war, riots, strikes, and terrorist attacks, the policyholder should be afforded a minimum period of thirty (30) days before the effective date of cancellation by the companies (as per article 54 of the Implementing Regulations).
d) A description of the refund of premium due to the policyholder on cancellation of the policy and when it would be payable.
e) For Protection and Savings insurance, in addition to (d) above, a description and illustration of the cash surrender value, if applicable, for each year of the plan.
“Free Look” Clause (Protection & Savings Insurance Products)
26. Every policy for protection and savings insurance should provide at least a twenty-one (21) day Free Look period from the date of delivery of the insurance contract for the policyholder to review the contract to assess its suitability and whether it provides the benefits described by the agent or broker. The policy will be deemed to be fully in force and this provision will be deemed to be waived by the policyholder, if the policyholder does not inform the insurance company within the period that the policy will be returned. If the policyholder deems the policy unsuitable, the insurance company must be notified in writing within the Free Look period and a refund of premiums paid to the customer subject only to the following:
a) Deduction of the expenses incurred by the insurance company on medical examination of the customer.
b) Deduction of a proportionate risk premium for the period of cover.
c) In respect of a unit linked plan, the insurance company shall also be entitled to make an appropriate adjustment to take account of changes in the unit price.
Pricing
27. Companies must apply the pricing structure submitted to and approved by SAMA as part of the product approval application.
Section B: Advertising and Promotion
Honest Representation
28. Companies must not communicate any statements or advertising, directly or indirectly, that are inaccurate, misleading, exaggerated, or deceptive, including but not limited to information on:
a) Name of the company issuing the insurance policy.
b) Financial status of the insurance company issuing the policy.
c) Coverage of the policy.
d) Benefits or advantages promised by the policy.
e) If the advertising includes the policy pricing, then it should indicate whether the price is inclusive of all fees.
Defamatory Statements
29. Companies should not include in their advertising any false, defamatory, or negative statements on other companies.
Section C: Pre-sale Customer Contact
Information about the Companies’ Offering
30. Companies must disclose, at a minimum, the following information to each customer prior to accepting an application for an insurance contract:
a) Whether they are an insurance company, or are acting on behalf of an insurance company, or acting on behalf of the customer.
b) Any financial relationship between a broker and the insurance company other than the normal commission agreements. In particular if there is any cross-ownership, or both parties have owners in common, the customer should be informed.
c) The nature and range of products and services they can provide.
Customer Needs Assessment
31. Companies must seek information from customers as might reasonably be expected to assess their insurance needs in relation to the products and services in which they indicated an interest. Companies are not required to determine customers’ insurance needs beyond the specific products and services in which customers have indicated an interest, except with regard to protection and savings contracts (see article 38 below).
32. Customers should be informed of their duty to disclose relevant and accurate information at every stage of the business relationship (e.g., applications, renewal, claim requests, etc.).
Advice to Customers
33. Companies must ensure that the advice given to clients adequately meets their needs.
34. Companies must provide sufficient information to enable customers to make informed decisions when purchasing insurance products and services, including:
a) An explanation of how the proposed advice meets their needs.
b) If different options are identified, the difference in the benefits, coverage, and costs of such options.
Avoidance of Churning
35. Companies should not advise a customer to replace an existing protection and savings policy with a new one, unless it fully justifies the recommendation and makes it clear that a second set of initial charges will be incurred, and the agent or broker will earn initial commissions on the new product.
Quotations to be Obtained from More than One Insurance Company
36. Insurance brokers must make reasonable efforts to obtain quotations from several insurance companies, and indicate the reasons for recommending any particular insurance company. For contracts other than protection and savings, if the insurance company recommended by the broker has not provided the cheapest quotation, the broker must provide details of the cheapest quotation to the customer, and a full justification for his recommendation. The justification should include a comparison of the terms and conditions, as well as the clarification of the difference in coverage and compensation offered by each insurance company, and if the broker would earn more commission on the recommended contract this must be explained to the customer.
Section D: Sale of Insurance Products and Services
Disclosure to Customers
37. Prior to accepting an application for an insurance policy, the companies must provide customers, upon their request, with the key terms and conditions of the product and service to be purchased, including but not limited to:
a) The name of the insurance company underwriting the policy.
b) Benefits, exclusions, and deductibles.
c) The coverage period.
d) All related costs, including premiums and any other fees.
e) The terms of payment covering the periodicity of payment, grace period, implications of discontinuing the premium and any other related details.
f) The claims handling procedure.
g) The complaints handling procedures.
h) The obligations of each party under the insurance policy.
i) The cancellation rights and conditions.
j) The renewal date and contract clauses to be renegotiated (if any).
k) The requirements for carrying out policy alterations.
l) Any aspect of the policy where the insurance company has the right to change something once cover has commenced such as benefit charges and policy fees on protection and savings business.
m) Any unusual restriction or condition attaching to the customer.
n) The postal address, telephone, fax and email contact details of the insurance company.
38. In addition to the above, companies must provide the following information with regard to protection and savings insurance products:
a) Whether the plan is participating, non-participating or an investment linked plan.
b) In case of participating, the basis of participation in profits i.e., cash bonus, deferred bonus, reversionary bonus, terminal bonus etc.
c) Plan illustration providing the sum insured, surrender value and paid-up value over the term of the plan. The illustration should show these values at the end of each of the first five (5) policy years, five (5) yearly thereafter, and at maturity date if appropriate or up to age eighty-five (85) if not.
d) If benefits are not fully guaranteed, the customer should be provided with three illustrations with gross investment return rates of 3%, 5% and 7% p.a.
e) The extent of any investment or expense guarantees. It should be clearly stated that values shown are for illustrative purposes only unless the investment and expense charges are fully guaranteed.
f) For non-linked plans, where applicable, a breakdown of the premiums and charges by main cover, supplementary cover and any other cover or services provided.
g) When presenting information related to past performance, the basis on which the performance was calculated together with a statement that past performance is not indicative of future performance.
h) If the policyholders’ funds may be invested in a range of linked investment funds, a description of the investment funds, which should include, at a minimum:
1. A description of the asset classes the fund may invest in.
2. A risk or volatility rating for each fund.
3. If the fund is measured against a benchmark, details of that benchmark.
4. Geographical spread of the investments.
5. A statement of any concentration of investments into particular types of investments.
6. The currency that the fund is priced in.
7. The frequency that the fund is priced.
8. The name of the fund manager, if the fund is external to the insurance company.
9. Past performance of the fund, subject to the same comments as stated in (g) above.
39. Companies selling protection and savings contracts should complete a client fact find containing sufficient information to fully back-up the product recommendation made. The fact find must be signed by the client, and retained on the clients file. In the event of any dispute over the appropriateness of the contract sold, the contents of the fact find will be taken fully into account. If the fact find is not on the file, or is poorly or partially completed, this is likely to lead to the dispute being resolved in favor of the client.
40. Insurance service providers arranging the insurance contact must disclose to the customer at the point of sale the full commissions and/or fees earned for the services provided from all sources.
41. Insurance cover may not be back-dated on any compulsory insurance product.
No insurance company, or employee of an insurance company may provide evidence of cover on a product unless the customer has committed to taking out a full annual policy that complies with the minimum standards set for that policy.
Customer Obligations
42. Prior to entering into an insurance contract, the companies must inform customers of their key obligations under the insurance contract to pay premiums in a timely manner and to provide full and honest disclosure of all relevant information needed to determine the insurance needs and underwrite the risk. The customer should only be expected to advise the companies of information that a reasonable person would regard to be relevant.
Confirmation of Coverage
43. Upon entering into an insurance contract, companies must promptly provide customers with official written confirmation of the insurance coverage. In case the full documentation is not available, the companies must issue temporary evidence of coverage confirmation, which can be legally used as a proof of coverage.
44. When an application for a compulsory insurance product such as motor or health is taken with a premium payment, a receipt should be provided to the customer indicating that coverage commences at an agreed upon date on or after the application date.
45. When an application for insurance is taken without a premium payment, a receipt should be provided to the customer indicating that coverage will commence at the date stated in the policy provided the first premium has been paid by that date. If the premium is not paid by the commencement date stated in the policy, then the company must have received a written and binding commitment from either the applicant or the agent or broker to pay the premium, in order for the company to initiate cover.
Documentation
46. Companies must promptly provide the full policy documentation to customers after entering into an insurance contract.
Related Parties
47. No insurance policy shall be issued or renewed by an insurance company to any of its owners or members of the Board of Directors, Senior and Executive Managers, and their related parties except after the payment of the full premium (as per article 49 of the Implementing Regulations). Related parties shall be taken to mean close family members, wives, husbands, children, parents, brothers, sisters, and any establishment in which any member of the Board of Directors has more than 5% interest.
Premium Collection
48. Companies must not collect premiums or fees for transactions that are not in the process of being provided or have not yet been provided.
49. Insurance companies are considered to have received the premiums once the premiums are received by the agents.
Section E: Post-sale Customer Servicing
After-Sale Service
50. Companies must provide after sales services to customers in a timely and appropriate manner, including responding to their inquiries, administrative requests, and requests for amending the insurance policies. In particular, companies must:
a) Provide certificates of coverage when requested by the customer.
b) Provide written confirmation of any amendments to the policy and any additional amounts due.
c) Issue receipts for any amounts received, unless payment is made by credit card or other form of automated bank transfer when the bank records will suffice.
d) Issue refunds or other charges due to customers.
51. Companies must promptly notify customers of any changes in the disclosures or conditions made to the customers at the time of entering into the insurance contract. This includes changes in the companies’ contact details and changes in the claims filing procedure.
Claims Handling
52. For companies whose licensed activities includes claims handling, they must:
a) Respond to claims filing in a prompt manner.
b) Provide claims forms showing all the information or steps required by the customer (including the beneficiary under a protection and savings policy) to file the claim.
c) Acknowledge to the insured customer the receipt of the claim and any missing information and documents within seven (7) calendar days from receiving the claim’s application form.
d) Provide adequate guidance to the insured customer in filing the claim and information on the claims handling process.
e) Inform insured customers of the progress of filed claims, at least every fifteen (15) working days (as per article 44 of the Implementing Regulations).
f) Handle claims in a fair manner.
g) Appoint a claims or loss adjuster when necessary, and notify the customer of such an appointment within three (3) working days.
h) Conduct a reasonable investigation of claims within a time period not exceeding ten (10) days for individual policyholders and thirty (30) days for commercial entities.
i) Notify the customer in writing of the claim acceptance or refusal promptly after completing the investigation, stating the following:
1. For accepted claims (full or partial acceptance):
- Settlement amount.
- How the settlement amount was reached.
- Justification if reduced settlement is offered or any part of the claim is not accepted.
2. For denied claims:
- Written reason for denying the claim under question.
- Copies of documents or information that were used in reaching the decision, if requested.
j) Explain the appeal or complaints process, if the settlement is not accepted by the customer.
k) For accepted claims, forward the claims settlement payment without undue delay upon receiving all required information and documentation (as per article 44 of the Implementing Regulations).
Claims Settlement
53. Insurance companies must settle claims within the time period indicated in article 44 of the Implementing Regulations, and when that is not possible, provide an explanation, with reason(s) for such delay.
Credit Control
54. Companies may not provide excessive credit to customers. Full payment terms must be agreed in writing at the outset of the policy, and the insurance company is allowed to cancel a policy promptly if payments are not made on time. In all cases, the company should promptly cancel a policy, after appropriate warnings, and thirty (30) days notice, if payments are not made. Premiums must be paid separately from, and may not be offset from, claims payments.
Complaints Handling
55. Companies must put in place a fair, transparent, and accessible complaints handling process and controls, and inform customers of the complaints filing procedures.
56. Upon receiving a complaint, companies must carryout the following:
a) Acknowledge the receipt of the complaint.
b) Provide an estimate of the time to address the complaint.
c) Provide the customer with the contact reference to follow up on the filed complaint.
d) Inform customers on the progress of the filed complaint.
e) Address the complaints in a prompt and fair manner within ten (10) working days of receiving the complaint.
f) Notify the customer, in writing, whether the complaint or the claim is accepted or rejected, and the underlying reasons for the decision and, if applicable, any offered compensation.
g) Explain the dispute filing process to escalate the complaint or the claim to the committees established by article 20 of the law on supervision of cooperative insurance companies.
Cancellation
57. Cancellation of policies must conform to the cancellation conditions specified in the policy terms and conditions referred to in article 25. Cancellations by the insurance company must be notified to customers in writing, including a reference to the relevant contractual cancellation condition and explanation of the underlying reasons for the cancellation.
58. Amounts due to customers as a result of the cancellation of a policy must be paid without undue delay, and must be calculated in accordance with the provisions of article 54 of the Implementing Regulations.
Renewal and Expiry
59. Companies must inform customers of the policy renewal or expiry date in a timely manner to allow customers to arrange continuing insurance coverage.
60. For all protection and savings contracts, insurance companies should provide an annual statement to their customers which includes the following information:
a) Projected maturity value, or policy value at the age of eighty-five (85).
b) Current sum insured on main and supplementary benefits.
c) Total premiums paid in the previous year.
d) Policies linked to investment funds should show the value of the units in each fund.
Distribution of Surplus
61. An insurance company must document the mechanism it will put in place to comply with article 70 of the Implementing Regulations, and submit this document to SAMA for approval. This document should then be freely available to customers and members of the public.